Accounting Quiz 1

11. Wolverine recorded the following journal entry: Inventory 2,000 Accounts Payable 1,000 Cash 1,000 Which of the following is most likely true: a. Wolverine paid off $1,000 in accounts payable from previous purchases of inventory. b. Wolverine sold $2,000 of inventory to customers and received $1,000 in cash and will receive $1,000 in payment in the future. c. Wolverine purchased $2,000 of inventory and paid $1,000 in cash and the remainder will be paid at a later date. d. Wolverine sold $1,000 of inventory to customers and received $1,000 in cash and $1,000 in payment on previous sales of inventory.

Wolverine purchased $2,000 of inventory and paid $1,000 in cash and the remainder will be paid at a later date. Dr. Inventory (+A) 2,000 Cr. Accounts Payable (+L) 1,000 Dr. Cash (-A) 1,000

You open a new business to sell Michigan State mugs and invest $300 of your own money in the business. In the first month of your business, you purchase a booth to set up on campus. You pay $240 for the booth and expect the useful life of that booth to be 2 years. You also purchase 100 mugs at $5 each. During the month, you sell 50 mugs at $10 each for cash. An additional 25 mugs are sold at $10 each and delivered to the French club. They promise to pay you next month. You hire your friend to help you work the booth, and agree to pay him $200 a month. As of the end of the month, you have not yet paid his wage. How much profit did you earn from your business in the first month of operation? How much cash do you have in your business at the end of your first month of operations?

a. $60 Cash Inflow = $300 initial investment + $500 mugs = $800 Cash Outflow = $240 booth + $500 mugs = $740 $800 - $740 = $60

Which of the following is consistent with the information included in the t-accounts? a. The purchase of land for $10,000 with cash during the period. b. The sale of land for $30,000 during the period. c. The sale of land for $10,000 with cash during the period. d. The purchase of land for $30,000 during the period.

a. The purchase of land for $10,000 with cash during the period.

. What is the formula for the calculation of retained earnings? a. Beginning Retained Earnings + Net Income = Ending Retained Earnings - Dividends b. Beginning Retained Earnings + Net income - Dividends = Ending Retained Earnings c. Beginning Retained Earnings + Net income + Dividends = Ending Retained Earnings d. Net Income - Dividends = Ending Retained Earnings

b. Beginning Retained Earnings + Net income - Dividends = Ending Retained Earnings Class 4 Slides

Which of the following statements is FALSE? a. Net income should be calculated before the balance sheet is prepared. b. Both the income statement and balance sheet are prepared as of a point in time. c. The income statement covers a period of time while the balance sheet is a point in time. d. The statement of stockholders' equity covers a period of time and should be prepared before the balance sheet.

b. Both the income statement and balance sheet are prepared as of a point in time. The Income Statement is prepared for a period of time, while the Balance Sheet is prepared as of a point in time (Class 2 Slides).

3. Use the information below for the next 2 questions: You open a new business to sell Michigan State mugs and invest $300 of your own money in the business. In the first month of your business, you purchase a booth to set up on campus. You pay $240 for the booth and expect the useful life of that booth to be 2 years. You also purchase 100 mugs at $5 each. During the month, you sell 50 mugs at $10 each for cash. An additional 25 mugs are sold at $10 each and delivered to the French club. They promise to pay you next month. You hire your friend to help you work the booth, and agree to pay him $200 a month. As of the end of the month, you have not yet paid his wage. How much profit did you earn from your business in the first month of operation? a. $275 profit b. $375 profit c. $165 profit d. $65 loss

c. $165 profit Revenue - Expenses = Net Income (Profit) Revenue = 75 mugs x $10 = $750 Expenses = $375 cogs + $10 booth depreciation + $200 salaries expense = $585 Profit = $750 - $585 = $165

Huskers paid $20,000 for security services in 2016. In January of 2017, Huskers paid an additional $5,000 for security services provided in the 2016 and $10,000 for 2017 services. How much should Huskers include as security expenses in 2016? a. $20,000 b. None of the answers are correct. c. $35,000 d. $25,000

d. $25,000 Expenses = $20,000 + $5,000 security services Service expenses are recorded in the same fiscal year the service is provided.

Which of the following is true? a. Liability accounts are decreased with entries to the right side of a t-account. b. None of the answers are true. c. Stockholder's equity accounts are increased with entries to the left side of a t-account. d. Asset accounts are increased with entries to the left side of a t-account

d. Asset accounts are increased with entries to the left side of a t-account Asset accounts are increased with debits (left side), while Liabilities and Stockerholders' Equity are increased with credits (right side).

The government regulatory agency that has the legal authority to prescribe and enforce financial reporting requirements for publicly traded corporations: a. GAAP b. FASB c. PCAOB d. SEC e. AICPA

d. SEC Class 6 Slides

. Which of the following is FALSE? a. Items reported at fair value are reported at their market value on the date balance sheet is prepared. b. Items reported at historical cost are reported at their cost on the date they were originally acquired. c. The primary roles of financial accounting are stewardship & valuation. d. Stockholders equity is equal to all of the historical income of a company

d. Stockholders' equity is equal to all of the historical income of a company. Stockholders' equity is composed of the Contributed Capital (cash received for ownership rights) and Retained Earnings (historical income of the company).

Which of the following is TRUE? a. The left-hand side of an account is used for recording credits and the right-hand side for recording debits. b. The accounting equation can be stated as "assets plus liabilities equals stockholders' equity." c. The annual financial statements of large publicly traded corporations are not required to be audited by independent certified public accountants as they maintain large internal accounting departments. d. The manager of a mutual fund considering investing in Coca Cola's common stock is likely to be among the users of the financial statements.

d. The manager of a mutual fund considering investing in Coca Cola's common stock is likely to be among the users of the financial statements. a) Debits are recorded on the left and Credits are recorded on the right. b) The fundamental accounting equation: A = L + SE c) The annual financial statements of publicly traded firms are required to be audited by independent CPAs. d) Investors, like mutual fund managers, use financial statements to make financial decisions. These individuals are called financial statement users.